The Questor column

By James Quinn

12:01AM BST 18 Oct 2006

Congratulations give way to get well soons for Clinton Cards

Clinton CardsStock: 67.75p +1.25pQuestor says Sell

Within days of being named one of Questor's tips of the year in January, Clinton Cards issued a massive profit warning. It was hardly the best start to the year either for Questor or the high street retailer.

The shares held up surprisingly well on the day, although over the following months they slipped, touching a low of 48p in August.

Clinton Cards announced results for the 18 months to July 2006 – having changed its year end – yesterday. For the 52 weeks to July the company made a profit of £4.6m on turnover of £472m.

Don Lewin, chairman and the group's largest shareholder, claimed the company had made good progress and was on track to make further progress. Management surgery and improved systems do appear to be paying dividends. In the first 10 weeks of the current trading period like-for-likes were up 1.2pc at Clintons Cards and up 4.1pc at Birthdays

A number of analysts upgraded full-year forecasts following the results and Numis now expects Clinton Cards to make £12.4m of pre-tax profits in 2007.

But others in the City are more sceptical, with Richard Ratner, retail analyst at Seymour Pierce, questioning whether the management can deliver a promised operating margin of 8pc.

Shares in Clinton Cards rose 1¼ on the results to close at 67½p, slightly above the 64½p Questor tipped them at in January.

But much of the recovery is already in the price and the shares are trading on almost 14 times 2007 earnings, a slight premium to its peers. The company, and in particular Birthdays, its discount fascia, is facing increased competition from supermarkets

Questor has lost confidence in Clinton Cards and group managing director Clinton Lewin. With observers still divided about the prospects for the crucial Christmas trading period, there are safer homes for investors cash.

Next Fifteen CommunicationsStock: 62p -1pQuestor says Buy

The tech boom is back with a vengeance, and the valuations of many Silicon Valley companies are starting to look decidedly punchy. Not so Next Fifteen Communications, however, despite being the area's biggest employer of tech public relations people.

Since moving from the main market to Aim 18 months ago, its shares have traded in a narrow 50-70p range, even though the valuations of many of its clients have gone giddy. Of course, it's only a PR company – so don't expect YouTube-style returns – but by the same token it looks a much safer bet than the majority of your two-geeks-in-a-garage start ups.

Run by British chief executive, Tim Dyson, who has a 12pc stake, and with Virgin PR supremo Will Whitehorn as chairman, Next Fifteen has punched above its weight across the pond, supplying advice to giants such as Yahoo!, Sun, AMD, Philips and Dell, with the latter particularly in need of a bit of guidance of late.

These companies and others are struggling to understand how to get their message across in the fragmenting world of digital media. They are seeking advice on how to best use corporate blogs, discussion forums and make the best use of things like podcasts.

Californians are also obsessive about being seen to be green. Witness John Doerr, one of Silicon Valley's most famous venture capitalists, who has pumped a fair proportion of his investments into environmentally friendly technology companies.

Driven by corporate restructuring exercises and explosive IT spending growth in emerging markets like China and India, the reported of earnings of US tech companies continue to show strong growth, with revenues rising faster than GDP. That is translating into bigger marketing budgets and bigger billings for the likes of Next Fifteen, which saw organic turnover rise 13.3pc at the full-year. Total revenue rose almost a third to £63m, while underlying profits jumped 35pc to £4.4m.

With a market cap of just £32m, the company is worth about half last year's sales, sells off a forward multiple of 10, and yields 2.5pc. There's always a chance it could be snapped up by a bigger rival.